Gold price many rebound to Rs 3,350/g

Gold price, which has turned negative in both international and domestic markets, is likely to rebound and may touch Rs 33,500 per 10 gram provided the rupee rallies back to 71, say industry experts.

Gold on Friday closed Rs 31,015 per 10 grams in the domestic market, while it was at USD 1,207.70 at the international level.

"The domestic market has not seen any spectacular demand due to high price and poor returns. The strengthening of US dollar, two rate hikes by the RBI since June and the fear of another hike next month have dented investment appetite for gold," Commtrendz Risk Management's director Gnanasekar Thiagarajan told PTI.

Though he said there has been no significant impact on gold price from the geopolitical tension in many areas, the same cannot be ruled out going forward.

"We see gold price moving around USD 1,185-1,255 per ounce with a possibility of an extension towards USD 1,275 by December-end. At the lower end, it may fall to USD 1,160. Domestic prices many rule between Rs 30,250 and Rs 33,500 if the rupee claws back to 71," he said.

Financial services provider ABans Group chairman Abhishek Bansal attributed the September to mid-October rally in gold prices to the ongoing US-China trade wars and on tension arising from the US sanctions on Iran coming into effect from November 4.

But then the price began to fall on fear of the US Fed hiking interest rates again. The Fed had on September 26 increased the rates by 25 bps to 2.25 per cent. This was the eighth hike since 2015 when it was at 0.25 per cent since the 2008 crisis.

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If the interest rate rises from current levels, it will increase borrowing costs and will be negative for gold, because then the bond market will be more attractive than gold, which has hardly given any returns in the last five years, he said.

He said the spike in domestic price was due to the increase in the international prices only, coupled with the steep fall in the rupee.

"The rupee, which depreciated against the US dollar by more than 15 per cent in the first 10 months of this year, is finding support over falling crude prices; this is another reason for the steep fall in domestic gold prices," he added.

Further, he said, higher gold prices kept buyers away during the festival season and demand from rural markets did not pick up as farmers are yet to receive the minimum support prices for their crops.
Over 60 per cent of the domestic gold demand comes from the rural markets.

Analysing these fundamentals, he said, international gold prices are likely to remain in a broader range of USD 1,180 to USD 1,240 by December end, while domestic price may hover around Rs 30,200 to 31,800, provided the rupee does not fall below 73-74 till March.

Chief commodities and currency analyst at Angel Broking, Prathamesh Mallya, sees gold demand remaining poor going forward, which will see international price correcting as the global market is worried about more interest rate hike by the US.

"By December we expect gold to fall by another USD 80-100 an ounce from the current price in the international market while in the domestic market we expect it to go down by Rs 1,200-1,400 by December end," he added.